If you have life insurance through work, you're not alone. Almost three-quarters of working adults who own life insurance got their coverage through their employer. It's convenient, usually cheap (or free), and requires zero effort on your part. But here's what surprises most people: that group policy sitting in your benefits folder? It's probably not enough to protect your family if something happens to you.
The typical employer-provided group life insurance policy covers just one to two times your annual salary—often around $50,000. If you make $60,000 a year, that might mean $120,000 in coverage. Sounds like a lot until you consider your mortgage, your kids' college funds, and the everyday expenses your family would face without your income. This is why understanding how group life insurance works, what it covers, and how to fill the gaps is so important.
What Is Group Life Insurance?
Group life insurance is a policy your employer buys to cover all eligible employees under one master contract. The beauty of this setup is that everyone gets coverage regardless of their health. No medical exams. No lengthy applications. You're automatically enrolled, often at no cost to you.
Most group policies are term life insurance, which means they only cover you while you're employed. If you die while working for that company, your beneficiary receives a death benefit—typically one or two times your annual salary. Some employers offer more generous coverage, but the industry standard hovers around $50,000 or a multiple of your salary.
The coverage is straightforward: if you die while employed and covered, your designated beneficiary files a claim and receives the payout. There are no investment components, no cash value building up over time—just pure death benefit protection.
The Coverage Gap Problem
Here's the uncomfortable truth: four in 10 middle-income Americans—about 50 million adults—acknowledge they're living with a life insurance coverage gap. Among women, that number jumps to 45%. Many of these people have group life insurance through work. They just don't have enough of it.
Financial planners typically recommend coverage worth 10 to 12 times your annual income. So if you earn $60,000, you'd want $600,000 to $720,000 in coverage. Your employer's one-time-salary policy of $60,000 leaves you short by more than half a million dollars. That's a massive gap.
The other big limitation? Your coverage disappears when you leave your job. Whether you're changing careers, starting your own business, or retiring, that group policy goes away unless you take action. And if you've developed health issues since you started working there, getting a new individual policy might be difficult or expensive.
Supplemental Life Insurance: Filling the Gaps
This is where supplemental life insurance comes in. Also called voluntary life insurance, it's additional coverage you can buy through your employer's benefits program. You pay the premiums through payroll deduction, but the rates are usually better than what you'd get buying an individual policy on your own—especially if you have health conditions.
The big advantage of supplemental group coverage is simplified underwriting. While you might need to answer some health questions, the process is far less rigorous than buying individual coverage. Many employers offer guaranteed issue amounts—meaning you can get a certain level of coverage without any medical questions at all.
Most companies let you buy coverage in increments, often up to three, four, or even five times your annual salary. Some programs cap the total amount at $500,000 or $1 million. The premiums increase with age, so the sooner you sign up, the better your rates.
What Happens When You Leave Your Job?
Losing your job shouldn't mean losing your life insurance. Fortunately, most group policies offer two continuation options: portability and conversion. These features let you keep your coverage after employment ends, but you need to act quickly—you typically have just 31 days from when your coverage ends to make a decision.
Portability allows you to continue term life coverage under a new individual policy. You're essentially taking your coverage with you. The rates are usually lower than conversion rates and might even be cheaper than buying a brand-new individual policy if you have health issues. Coverage can typically continue until age 80 as long as you pay your premiums. The downside? You'll now be paying the full premium yourself instead of having your employer subsidize it.
Conversion is your other option. This lets you convert your term policy into a permanent whole life policy without taking a medical exam—regardless of your current health. This is huge if you've developed a serious condition since you were first insured. The trade-off is that permanent insurance is significantly more expensive than term coverage. But if you need lifelong protection and can't qualify for individual coverage due to health issues, conversion is a lifeline.
Here's the critical part: if your employer didn't notify you in writing at least 15 days before the 31-day deadline, you might have additional time—up to 15 days after receiving notice or 91 days after your coverage ends, whichever comes first. Don't assume you've missed the window. Check with your former HR department or the insurance carrier directly.
How to Get Started
First, pull out your employee benefits handbook or log into your HR portal and find out exactly what coverage you have. Look at the death benefit amount. Calculate what your family would actually need if you weren't around—think mortgage, debts, income replacement for several years, college funds, and final expenses.
If there's a gap, look into supplemental coverage through work during your next open enrollment period. Compare those rates with individual term life policies from independent insurers—sometimes individual coverage is competitive, especially if you're young and healthy. The key is not to rely solely on that basic group policy your employer provides.
And if you're planning a job change, understand your portability and conversion options before you hand in your resignation. Mark your calendar for that 31-day deadline and get quotes from the carrier. Having a plan in place means your family stays protected no matter where your career takes you.
Group life insurance is a valuable employee benefit, but it's rarely enough on its own. By understanding how it works, recognizing its limitations, and taking steps to supplement your coverage, you can make sure your family has the financial protection they truly need.
